Archive - Jun 23, 2014 - Story

Comfortably beating expectations, and in Markit's words, USA is "booming again... as data suggests that GDP should be set to rise by at least 3.0% after the 1.0% decline in the first quarter," US Manufacturing PMI printed 57.5, its highest since May 2010. Despite the "booming" economy, employment rose only very marginally and new export orders growth dropped as prices rose once again. The Fed's "you don't need QE anymore, the economy is doing great on its own" meme is confirmed. The market seems disappointed at the 'good news' and did not react at all.

The May surge in airfare prices was so dramatic and unexpected, that on a compounded annualized basis (CAGR), the May surge in airline fares was a whopping 97%: the highest since 1999, and the third highest ever.
So, sorry America: you are stuck where you are, eating food that has rarely if ever cost more, fueling up with gas that is approaching it all time high summery prices. Enjoy Yellen's "noise."

First it was US' Victoria Nuland's "fuck Europe" leaked recording; then Turkey's Erdogan faced embarrassing details of a false-flag war with Syria from leaked recordings; then last week's Polish central bank was exposed (by leaked recordings) as offering support for the government in return for favors (crashing any faith in central bank independence); and then this weekend, Poland's foreign minister had some rather colorful language and perspective exposed (by leaked recordings). The Polish Zloty has been hammered lower in the last few days since the events broke (though clear CB intervention has rescued it today) and the Polish Prime Minister is fuming: the "criminal group" that taped public officials has the sole aim of destabilizing Poland during “key moment” as EU reshapes itself amid Ukraine crisis, Tusk blasted, adding (rather pointedly), "people who have organized criminal eavesdropping will not dictate to Poland who governs the country and which ministers are to be dismissed." One wonders who he is talking about; who has the technical know-how and organization to arrange such mass eavesdropping?

One of the great "paradigms" of the New Normal tech bubble that supposedly differentiated it from dot com bubble 1.0 was that this time it was different, at least when it came to advertising revenues. The mantra went that unlike traditional web-based banner advertising which has been in secular decline over the past decade, social media ad spending - which the bulk of new tech company stalwarts swear is the source of virtually unlimited upside growth - was far more engaging, and generated far greater returns and better results for those spending billions in ad bucks on the new "social-networked" generation. Sadly, this time was not different after all, and this "paradigm" has also turned out to be one big pipe dream. According to the WSJ, citing Gallup, "62% of the more than 18,000 U.S. consumers it polled said social media had no influence on their buying decisions.

This week brings PMIs (US and Euro area ‘flash’) and inflation (US PCE, CPI in Germany, Spain, and Japan). Among other releases, next week in DMs includes [on Monday] PMIs in US (June P), Euro Area Composite (expect 52.8, a touch below previous) and Japan; [on Tuesday] US home prices (FHFA and S&P/Case Shiller) and Consumer Confidence (expect 83.5, same as consensus), Germany IFO; [on Wednesday] US Durable Goods Orders (expect -0.50%, at touch below consensus) and real GDP 1Q anniversary. 3rd (expect -2.0%) and Personal Consumption 1Q (expect 2.0%), and confidence indicators in Germany, France and Italy; [on Thursday] US PCE price index (expect 0.20%), Personal Income and Spending, and GS Analyst Index; and [on Friday] Reuters/U. Michigan Confidence (expect slight improvement to 82, same as consensus), GDP 1Q in France and UK (expect 0.8% and 0.9% yoy, respectively), and CPI in Germany, Italy, Spain and Japan.

With Gen-X and Gen-Y out as buyers, who's left to scoop up the tens of trillions of dollars of Boomer assets at bubblicious prices? Given that other nations face the same demographic dilemma, the answer appears to be: no one.

Following our comprehensive update yesterday, there is not as much to report, but for all those following the Iraq situation closer than the surgeon general recommends, here are the latest updates.

• The Man Who Broke the Middle East (Politico)
• Kerry presses Maliki as Iraq loses control of Syrian, Jordanian borders (Reuters)
• Hank Paulson takes on global warming next: The Coming Climate Crash - Lessons for Climate Change in the 2008 Recession (NYT)
• In Yellen We Trust Is Bond Mantra as Inflation Threats Dismissed (BBG)
• After port fraud, China's vast warehouse sector under scrutiny (Reuters)
• Draghi Says Unlimited Cash Through 2016 Is Rate Signal (BBG)
• Tapes Said to Reveal Polish Minister Disparaging U.S. Ties (NYT)
• CDC reassigns director of lab behind anthrax blunder (Reuters)
• BNP set to receive ban to transact in USD as part of $9 billion settlement (WSJ)
• GE Clears Last French Hurdle to Clinch Alstom Deal (BBG)
• Al Jazeera journalists jailed in Egypt, supporters stunned (Reuters)
• ISDA Asked to Rule If Argentina Credit-Default Swaps Triggered (BBG)

Following last night's laughable (in light of the slow motion housing train wreck that is taking place, not to mention the concurrent capex spending halt and of course the unwinding rehypothecation scandal) Chinese PMI release by HSBC/Markit (one wonders how much of an allocation Beijing got in the Markit IPO) which obviously sent US equity futures surging to new record highs, it was almost inevitable that the subsequent manufacturing index, that of Europe, would be a disappointment around the board (since it would be less than "optical" to have a manufacturing slowdown everywhere in the world but the US). Sure enough, first France (Mfg PMI 47.8, Exp. 49.5, 49.6; and Services PMI 48.2, Exp. 49.4, Last 49.3) and then Germany (Mfg PMI 52.4, Exp. 52.5, Last 52.2; Services 54.8, Exp. 55.7, Last 56.0), missed soundly, leading to a broad decline in the Eurozone PMIs (Mfg 51.9, Exp. 52.2, Last 52.2; Services 52.8, 53.3, Last 53.2), which meant that the composite PMI tumbled from 53.2 to 52.8: the lowest in 6 months.